Its Cash Dwindling, Kodak May Try to Raise $500 Million in New Financing

Eastman Kodak may not survive unless it is able to cash in on its portfolio of patents or find some other way to raise cash, like issuing more debt, the company stated on Thursday.

In reporting weaker-than-expected third-quarter earnings, Kodak stated that its “ability to continue operations” during the next 12 months depended upon whether it could sell or license its vast trove of patents and raise as much as $500 million in new financing.

“There is uncertainty regarding whether the company can, and the company can provide no assurance that it will, successfully execute the actions listed above,” according to Kodak’s financial filings.

Antonio M. Perez, Kodak’s chief executive, played down the dire statements in a call with analysts. Mr. Perez said he was confident that the company would successfully sell part of its patent portfolio and that his turnaround efforts were succeeding.

Many Wall Street analysts have been saying for some time that Kodak may burn through its available cash before its turnaround efforts succeed. After the earnings announcement on Thursday, analysts had differing interpretations of Kodak’s gloomy statements.

“You’ve got to say everything that can possibly happen bad,” Mark Kaufman of Rafferty Capital said of the S.E.C. requirements. He noted that Kodak did not say anything about a possible bankruptcy, a rumor that had circulated in late September amid the company’s hiring of a law firm known for its restructuring expertise.

But Chris Whitmore, of Deutsche Bank Securities, said it was clear that unless Kodak could generate significant cash from its patent portfolio, or sell some other assets, “their cash position becomes pretty dicey by the middle of next year.”

“I don’t think we should ignore it,” Mr. Whitmore said, referring to Kodak’s doomsday remarks. “Legalese is there for a reason.”

Shares of Kodak on Thursday declined 6.7 percent to close at $1.12. Since the first of the year, Kodak shares have lost more than three-quarters of their value.

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In reporting its third-quarter results, Kodak trimmed its estimates for how much revenue it would generate for the year, $6.3 billion to $6.4 billion. Previously, the company said it sales could be as high as $6.7 billion.

In addition, Kodak predicted that it could report losses of $600 million for the year. Previously, the company said its losses would be $200 million to $400 million.

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But investors were most concerned about how quickly Kodak was spending its cash, and on Thursday, the company said it had $862 million left at the end of the third-quarter, 10 percent less than it had at the end of the second quarter.

The company expects to end the year with $1.3 billion to $1.4 billion in cash.

Mr. Perez, who was named chief executive in 2005, has spent hundreds of millions of dollars trying to transform the onetime film giant into a digital juggernaut, focusing on consumer and commercial printers, packaging and work-force software.

Those businesses are growing, albeit from relatively small bases. For instance, packaging revenue was up 89 percent in the most recent quarter; the consumer printers and ink business was up 44 percent. Mr. Perez predicted that consumer printers and ink would turn a profit in the next quarter.

But the question remains whether Kodak, which is based in Rochester, can continue pouring money into the new businesses long enough for them to stand on their own. He has financed his strategy largely by selling assets and licensing Kodak’s patents.

In July, the company announced that it would sell about 10 percent of its patents, and Mr. Perez said Thursday that he was pleased by the response. He declined to provide a timeline or to discuss potential prices. Kodak also said it was exploring the possibility of raising $500 million in new debt.

“It buys them time,” Mr. Whitmore said of the patent sale. “So much of the outcome in the short run is determined by their ability to monetize those I.T. assets, those patents. After that, then what?”

The problem, he said, is that there is so much uncertainty in Kodak’s turnaround plans. Will it get money for its patents? Can it sell other assets? Will Kodak win a patent infringement case against Apple and Research in Motion before the United States International Trade Commission? If and when will the new businesses make money?

“There are many balls in the air,” Mr. Whitmore said. “It’s like Kodak is juggling while sitting on a unicycle in the dark.”

But Ulysses Yannas, a broker at Buckman, Buckman & Reid, said the talk of Kodak’s demise was premature. “If you analyze what is going on, you will find that the areas they are spending all this money are doing quite well,” he said.

A version of this article appears in print on November 4, 2011, on Page B3 of the New York edition with the headline: Its Cash Dwindling, Kodak May Try to Raise $500 Million in New Financing. Order Reprints|Today's Paper|Subscribe